How Healthy Does the US Steel Industry Look Heading into Q4?



Fourth quarter

We are now towards the end of the third quarter. Generally, the fourth quarter is seasonally weak for US steel companies due to lower seasonal demand from the construction and the automotive sectors. In this series, we’ll look at some of the recent steel industry indicators to help us gauge the US steel industry’s health.

It’s been an interesting year for the steel industry. President Trump has touted steel as one of his administration’s success stories. Last week, in a tweet, Trump said, “Our Steel Industry is the talk of the World. It has been given new life, and is thriving. Billions of Dollars is being spent on new plants all around the country.”

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Section 232 tariffs

To be sure, the Section 232 tariffs that the Trump administration imposed this year have boosted US steel prices, helping companies like Nucor (NUE) and Steel Dynamics post record earnings. However, despite rising earnings, investors haven’t warmed up to steel stocks the way one would have expected. U.S. Steel (X) and AK Steel (AKS) are trading with double-digit losses in 2018. However, Cleveland-Cliffs (CLF), which supplies iron ore to US steel companies (SPY), is trading with handsome year-to-date gains of 75.6% based on September 26 closing prices.

The Section 232 tariffs were expected to boost US steel production by curbing imports. In the next article, we’ll look at the recent trend in US steel imports.


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